MLM in the Dock Again USANA Pyramid, Evades Tax, Rigs Market
& Insider Trades
Back in January, 2003 I wrote an article in this publication
about USANA, a Utah-based MLM (multi level marketing) public
company selling nutritional supplements. In the article I
researched their products, having been half-convinced by people
who weren’t flakes, including doctors, that the USANA
products were worth a look.
I was looking for a high-quality competitively priced multi
supplement and a local chiropractor planned a business bringing
USANA to Bali. What my research found was USANA supplements
were average at best and massively overpriced for what they
were. I also spotted questionable product and business practices
often used by MLM companies, but gave them the benefit of
the doubt, concluding that as far as MLM companies go, they
seemed to be one of the better ones.
Well it‘s not true, I was being far too nice!
Since writing the article I’ve had over 200 e.mails
from people being encouraged to sign up with USANA. They’d
googled USANA and my BA article had shown up for them. I hope
it helped them make the right decision. A small handful of
zealots attacked me, suggesting I was an atheistic moron if
I couldn’t see how wonderful USANA’s products
were, and who in hell was I to question a medical saint like
USANA owner, Dr Myron Wentz, anyway?
Well, I didn’t know the half of it. In April of this
year a rash of class action suits have been filed against
USANA in the US District Court of Utah alleging that:
i) the company was operating an illegal pyramid scheme.
ii) 74% of the company’s distributors failed within
their first year.
iii) 87% of the company’s associates lost money and
were cheated.
The action further alleged the company made false statements
and withheld information to boost stock and that directors
of the company engaged in insider trading. On 15 March the
Wall Street Journal reported on the investigation of USANA
for operating a pyramid scheme and other irregularities.
Also in March of this year, a USANA director had to resign
for lying about his academic qualifications. It was revealed
that Mr Denis Waitley had not, as claimed, earned an M.A.
degree from the Naval Post Graduate School in Monterey, CA.,
and that the Doctorate or PhD. in Human Behaviour from La
Jolla University he cited was in fact a bogus qualification
from a defunct and unaccredited “diploma mill”.
Further investigation revealed the company has been under
investigation by the US tax authorities since 2004 and in
June of that year USANA’s owner and founder had renounced
his US citizenship, declaring he was “a citizen of the
world” moving 45% of USANA’s funds to an undisclosed
location in Liechtenstein. Meantime shareholders were not
informed of any of this, nor the fact that Dr Wentz was under
criminal investigation by the IRS.
Lastly, it was revealed that between 2003 and 2006 the company
had bought back US$133m of its shares using money from the
87% of its failed distributors to do so, while insiders had
sold off and pocketed a further $95m.
Nice company! Yet if you meet up with a USANA distributor
they will almost certainly be in denial about it all. That’s
how MLM folk are, you see?
So, lets get down to brass tacks about money, USANA and you.
The company’s figures for the 1st quarter of 2006 showed
sales of US$89m and 38% of that being US$34m was paid out
in commission worldwide. Of the 174,000 active distributors
in USANA half of that commission went to 1% comprising distributors
at senior level, leaving some $17.0m to be split among the
140,000 remaining low level distributors. That’s an
average of $121 per quarter, $40.30 per month, or $484.00
per annum. Bearing in mind the required minimum monthly product
purchase per month is $100.00 not including sales materials,
shipping or your buy-in costs, it means the vast majority
97.16% of distributors are losing an average of $716.00 a
year.
Because USANA doesn’t tell associates the truth about
the numbers, it is a pyramid and they are committing fraud.
Its like joining a club where you have to pay all the existing
10,000 members a buck each and in a couple years you will
be able to collect a buck from the newest member.
The web is an extraordinary place. You can find all sorts
of information you’d never expect. Like this chat room
exchange posted in December 2003 on my article between a USANA
zealot, obviously not the sharpest knife in the drawer, and
someone having some sport with him. It went like this:
ParacelsusAsia: I went to USANA’s website....... as
usual with MLM, it is not easy to get hard data.
Ken W: Not easy? USANA’s website has won awards!!!
Guest NA: Who bestowed them Ken? The USANA Website Festival?
It’s an awkward site to navigate. Anyone can get on
and see for themselves: www.usana.com.
ParacelsusAsia: The more I looked the more USANA looked like
any MLM company pulling the usual dubious stunts offering
a range of average and overpriced products.
Ken W: I wonder with it havin hit the business spotlight so
much if he would still have the same stupid opinion. As one
can easily see....boy oh boy was he wrong....Not only on his
prices.
Guest NA: You should get an updated version on this guy’s
opinion.
ParacelsusAsia: USANA offers an antioxidant and multi mineral
at a cost of US$53.30.
Ken W: Hmmm he foregets to mention that the majority of the
people get there Essentials sent to there door by USANA for
$39.90. This guy kinda reminds me of you NA!!! :)
Guest NA: You yourself have admitted, Ken, that you spend
$6.00/day on vitamins ($186). By the way, it’s spelled
“THEIR door.”
ParacelsusAsia: What I was really looking for was one single
formulation, but it seemed this would have to be the basis
of any comparison.
Ken W: EXCUSE ME! A single formulation? and this guy is suppose
to know about nutrition? :)
Guest NA: That’s all USANA offers: One single formulation,
“Essentials.” You have to take them whether you’re
old, young, sick, healthy, athletic, sedentary, overweight,
anemic, diabetic, have other chronic illnesses, etc.
ParacelsusAsia: The supposedly independent MacWilliams study
says USANA’s multi is the best in the world and charges
$16.00 a pop to 170,000 distributors all invested in hearing
that.....
Ken W: Ever wonder just how long it would take and how much
money it would cost a person to do there own comparing? :)
Guest NA: Still not getting it, Ken. It’s not the comparisons
in which the book’s importance (or lack of) is found
It’s the *analysis* of the comparisons. Have you heard
of that process: “analysis”?
ParacelsusAsia: USANA stresses their products are pharmaceutical-grade
and are tested to be bio-available, whatever they mean by
that....
Ken W: This guy doesn’t even know what bio-available
means :)
Guest NA: Again missed the point, Ken. When he says “whatever
they mean by that,” he’s pointing out that USANA
won’t provide an operative definition of “bioavailability,”
even though they use the term in their marketing all the time.
He’s pointing out that USANA products are almost never
tested on actual humans, and when they are, the results aren’t
published in normal scientific & nutritional journals
read by professional nutrionists (and no, Ken, that does NOT
nec. mean “best selling authors.”
ParacelsusAsia: What this research has confirmed for me yet
again is that MLM is an unattractive form of marketing open
to all sorts of abuse and misrepresentation,
Ken W: HAA!!! like that doesn’t happen with other companies,
eh NA! :)
Guest NA: Good moral and ethical defence, Ken. {“Well,
they all do it!”).)
USANA is a scam, a pyramid and illegal. Anyone doing USANA
as a business is either a bit of a dimwit like poor Ken W.
here, an irredeemable but poverty stricken optimist, or both.
If they tell you they are making money doing it, they are
either a liar or very smart and very unscrupulous. Unless
you’re the smart one, when you hear MLM head for the
hills!
